In a speech in Minneapolis, Secretary Yellen is announcing new funding sources for housing production, urges further action by Congress, states, and localities
WASHINGTON – Today, U.S. Secretary of the Treasury Janet L. Yellen is delivering remarks on housing policy and announcing new efforts by the Treasury Department using its existing authorities to increase the supply of housing, as part of the Biden Administration’s push to lower costs. In announcing these new initiatives, Secretary Yellen will note that “[G]iven the scale of the challenge, we must and will continue to do more.”
The efforts Secretary Yellen is announcing include:
- A new Treasury program administered by the CDFI Fund that will provide an additional $100 million over the next three years to support the financing of affordable housing;
- An effort to provide greater interest rate predictability to state and local housing finance agencies borrowing from the Federal Financing Bank to support new housing development;
- A call to action for the Federal Home Loan Banks to increase their spending on housing programs;
- A new “How-To Guide” to support state and local governments in using recovery funds provided by Treasury to construct housing; and
- An update to the Capital Magnet Fund to provide greater flexibility to CDFIs and non-profits that finance affordable housing.
These initiatives build on a set of housing announcements that Deputy Secretary Wally Adeyemo made in March of this year in a blog post. Treasury also released a blog post today underscoring that increasing the nation’s housing supply is essential to addressing the long-term trend of rising housing costs.
Secretary Yellen is speaking at the recently completed Family Housing Expansion Project (FHEP), the largest new-unit project that the Minneapolis Public Housing Authority (MPHA) has developed in more than 20 years. The Project-which will contain 84 units serving households earning at or below 30% of the Area Median Income-was financed in part by $4 million in State and Local Fiscal Recovery Funds (SLFRF) provided by Treasury and made possible by Minneapolis’ changes in zoning law. Secretary Yellen is also participating in a roundtable conversation with Senator Tina Smith (D-MN) and housing stakeholders.
Today’s announcements build on the Treasury’s Department’s efforts during the pandemic, which kept Americans in their homes and led to the most equitable recovery on record. Through Treasury’s Emergency Rental Assistance program and Homeowner Assistance Fund, state, local, territorial, and Tribal governments have distributed over $40 billion in assistance to homeowners and renters, including more than 12.3 million rental assistance payments to families in need. Over 58,000 households in Minnesota alone have received assistance. These programs resulted in historically low foreclosure and eviction rates even at the height of the pandemic, creating a stable foundation for robust economic growth and a historically low unemployment rate.
Treasury has further supported the construction of new housing through tax incentives, fiscal recovery programs, and support for housing lending by community lenders and state and local housing finance agencies. The efforts to be announced today will further strengthen several of these policies and programs. In her speech, Secretary Yellen will urge Congress to pass bipartisan legislation to expand the Low-Income Housing Tax Credit, one of several of the Biden-Harris Administration’s legislative proposals that would collectively build and preserve over 2 million homes, and will urge additional state and local action to remove excessive legal barriers to housing development.
New CDFI Fund Housing Program
Through the Emergency Capital Investment Program (ECIP), Treasury invested more than $8.57 billion to community lenders during the pandemic to support lending to small businesses, consumers and affordable housing projects. Through the end of 2023, ECIP participants invested $1.2 billion in 433 affordable housing projects across the country.
Today, the Treasury Department is announcing that it will devote $100 million over three years in payments resulting from these investments to a new program at the Community Development Financial Institutions (CDFI) Fund primarily focused on increasing the supply of affordable housing. This will allow the CDFI Fund to make its funds go further to support the production of housing that is affordable to low- and moderate-income households. The CDFI Fund projects that this new funding could support the financing of thousands of affordable housing units.
FFB Financing Support for HUD’s Affordable Housing Initiative
Earlier this year, Treasury and the Department of Housing and Urban Development announced an indefinite extension of the Federal Financing Bank’s (FFB) financing support for a risk-sharing initiative between HUD and state and local housing finance agencies. This program dramatically reduces costs for housing finance agencies by allowing them to borrow funds at just above the rate at which the U.S. government borrows. This extension is expected to create or preserve approximately 38,000 additional rental homes over the next ten years alone.
The Treasury Department and HUD are now actively exploring a major improvement to the HUD/FFB Multifamily Risk Sharing Program that would provide greater interest rate predictability to participating state and local housing finance agencies. Treasury has received stakeholder input suggesting this would substantially increase the number of new projects financed through the program. If implemented, Treasury estimates this would lead to thousands of additional housing units in the coming years.
Federal Home Loan Banks
In her speech, Secretary Yellen is calling on the 11 Federal Home Loan Banks (FHLBs)-government-sponsored enterprises that play an important role in the housing finance system-to increase their support for housing programs. The Federal Home Loan Banks are required by law to devote at least 10 percent of their net income to housing programs, and the Biden-Harris Administration’s FY2025 budget proposed increasing this requirement to 20 percent. The FHLBs have voluntarily increased their commitment to 15 percent, and Secretary Yellen is urging the FHLBs to increase this commitment to at least 20 percent, with a particular focus on prioritizing new construction.
If this level of commitment had been in place over the past five years, the FHLBs would have contributed nearly $2 billion more to housing programs than was required by law.
SLFRF Affordable Housing How-To Guide
Treasury is releasing today an updated “Affordable Housing How-To Guide” that provides recipients of State and Local Fiscal Recovery Funds (SLFRF) additional guidance about how to use recovery funds to increase the supply of housing. SLFRF recipients have already budgeted $7.4 billion to support construction, preservation, and stabilization of more than 25,000 units, including the project visited by Secretary Yellen today. This is part of $19 billion budgeted by SLFRF recipients for housing-related projects overall.
In March 2024, Treasury released new guidance to make it easier for states and localities with funds remaining to use those funds to boost the supply of housing, including by funding projects that support the needs of teachers, firefighters, nurses, and other workers increasingly priced out of certain markets. The updated “How-To Guide” gives recipients concrete information about how they can layer SLFRF funds with other resources to support new construction.
Capital Magnet Fund Rule
Finally, Secretary Yellen is announcing that the CDFI Fund is updating a rule for the Capital Magnet Fund (CMF), the CDFI Fund’s existing affordable housing investment program, to reduce administrative burden and allow recipients to focus their resources on the production and preservation of housing.
In FY 2023, the Capital Magnet Fund made over $320 million in awards projected to leverage more than $11.1 billion in resources to support affordable housing. Awardees planned to develop more than 32,700 affordable housing units, with half of awardees planning to invest a portion of their award to support housing in rural areas.